IFI governance

Commentary

European NGO statement on Bank governance reform

9 October 2008 | Statement

Time for change: European civil society open statement on governance reform of the World Bank

The World Bank has a mandate to combat poverty and a focus on developing countries, where it often wields enormous power. Yet developing countries have little say in how it is run. Civil society organisations and others have catalogued the Bank’s shortcomings in its democracy, transparency, accountability and legitimacy. It is time for fundamental reform to redress the democratic deficit at the World Bank, and give real power to the developing countries the Bank is supposed to support.

European governments, who hold eight chairs and have over 30% of the vote at the Bank, have a special responsibility to push for reform. We, the undersigned organisations, call upon our European governments to back a progressive proposal for transformation of the World Bank that includes the key reforms below.

The following two reforms are fundamentally important; without progress in these areas, any deal cannot be regarded as a success.

1. Parity in voting rights

The World Bank, as a development institution, has a voting structure which undermines its effectiveness and legitimacy. This year’s IMF quota reforms were inadequate and are not a good model for the Bank, which has a very different purpose from the IMF. The distinct nature of the Bank was recognised in the 2008 Spring Meeting Development Committee communiqué. We support developing country government calls for the introduction of parity of voice between developed, and developing and transition countries, within an agreed timeframe. This should allow for voting shares to much better reflect population size and recognise that the real impact of World Bank activities is felt in the developing world.

Voting rights reform at the IFC

The International Finance Corporation, the World Bank’s private sector lending arm, is a major player in many developing countries, and its lending and influence are growing. However it has the most imbalanced governance structure of any of the World Bank Group’s arms. It is therefore crucially important that reforms to World Bank governance to achieve the principle of parity of voice between developed, developing and transition countries, should also include the IFC.

2. Greatly improved transparency

The World Bank makes decisions which deeply affect the lives of people across the world. Citizens have a right to accurate, timely, and accessible information about the activities of the Bank and the positions their governments are taking within the Bank’s governing structures. We support the Global Transparency Initiative’s demand that the Bank move towards a presumption of disclosure for all information, with a strictly limited regime of exceptions. Two key preliminary steps that would demonstrate commitment to transparency would be: (a) the publication of the transcripts of board meetings, and (b) the adoption of formal voting at board meetings, with voting records published.

The following three simple steps should be taken rapidly to demonstrate good faith. These changes should not be tied any agreement on changes in voting rights:

a. A third chair for Africa

It is scandalous that Africa, the continent most affected by the World Bank has only two seats at the board. Having an additional African chair would move towards a fairer allocation of board seats, enhance the effectiveness of the Bank, and signal a commitment to making the Bank more accountable to African countries.

b. Merit-based selection of the president

The current arrangement, where the USA automatically appoints the World Bank president, is completely unacceptable in the modern world. European governments have rightly announced their intention to give up their control over the appointment of the IMF Managing Director: it is time for the US to do the same. We demand a transparent, democratic, merit-based process for selecting the heads of multilateral institutions, including the World Bank. This should involve all member countries equally and all significant stakeholder groupings. Geographical diversity and gender equality in top positions should be actively encouraged.

c. Helping IDA countries boost their voting rights

Developing countries do not always have the resources to take up their IDA subscriptions, and therefore their voting rights are reduced. A simple, fully-funded mechanism to allow them to do this should be introduced.

European consolidation

If developing countries are to increase their votes and number of seats on the board then developed countries will have to reduce theirs. Europe is the most over-represented region, with 8 out of 24 seats on the board. Consolidating these seats would not only free up space for developing countries to take additional seats, but also dramatically improve European coordination and coherence at the Bank.

By pushing for the above set of concrete, achievable reforms, European governments can demonstrate their commitment to transforming the international financial architecture so that it becomes more democratic, accountable and legitimate. These reforms are a fundamental pre-requisite for ensuring that international institutions can play an effective role in the global fight against poverty.

Signatories

  1. 11.11.11, Belgium
  2. Action Aid International
  3. Berne Declaration, Switzerland
  4. BOND (British Overseas NGOs for Development), UK
  5. Bretton Woods Project, UK
  6. Changemaker Norway, Norway
  7. Christian Aid, UK
  8. CEE Bankwatch Network, Europe
  9. CRBM, Italy
  10. Deepti Bhuban
  11. Development Fund, Norway
  12. Diakonia, Sweden
  13. Eurodad (European Network on Debt and Development), Belgium
  14. Empower
  15. FIVAS (Association for International Water Studies), Norway
  16. Health Unlimited, UK
  17. IBIS, Denmark
  18. Jubilee Debt Campaign, UK
  19. The Norwegian Forum for Environment and Development, Norway
  20. Tearfund
  21. Oxfam International
  22. Plan B, UK
  23. Plate-forme Dette & Développement, France
  24. Polish Green Network, Poland
  25. SLUG, Norway
  26. UBUNTU Forum Secretariat, International
  27. Urgewald, Germany

Please send further sign-ons (organistion, country) to Jesse Griffiths at jgriffiths@brettonwoodsproject.org .